Home Loan Guide for First Time Buyers in India

Best home loan guide for first time home buyer in Pune

Are you going to be a first-time buyer of home loan in Pune and want some guidance regarding it?

Are you confused regarding home loans and don’t know whether to go for it or not?

If yes, then here is our home loan guide for Pune which will help you in making a wise decision with regards to it. You will find everything that will give you guiding insights into Home loan prospects.

What is a Home Loan?

A home loan is a secured type of loan that is borrowed from banks or NBFCs for purchasing a House. The money is repaid back to the lenders in the form of EMIs. When deciding between Bank and NBFC, it would be better to go for the bank because banks have low-interest rates, prepayment charges, foreclosure charges, and provide overdraft facility as compared to NBFC.

What are the types of home loans in Pune?

Joint Home Loan

A joint home loan is a loan that is taken jointly by family members. The family members can be parents, spouses, siblings and/or offspring. A Huge amount of loan can be approved easily if the loan is applied jointly. Such loans have tax-benefits. check out our detailed guide on joint loan here.

Home-purchase loan

It is a type of loan which is offered to buy the residential property. Generally, you can get around 80 to 85% of the market value of the house.

Land-purchase loan

This is a type of loan that is offered so as to buy the plot on which you are looking to construct a home. You might get around 80 to 85% of the plot value.

Home-construction loan

Home-construction loan is given to those who want to construct a house on the plot which they have already owned.

Home-extension loan

Home-extension loan is given to those who want to expand their existing house. Most of the bank include such a loan in their home-improvement loan.

Home-improvement loan

This is a type of loan which will help you in getting the funds for your house renovation liking painting, repairs, electrical wiring, and water-proofing, etc.

NRI-home loan

Such a loan will help an NRI in buying home in India.

What is an EMI in a home loan?

EMI (Equated Monthly Installments) means the interest that you pay monthly to clear your loan repayment obligations within the given time period.

What are the types of home loan interest rates?

There are two types of home loan Interest Rates.

Fixed-Rate Home Loan

Here the interest rate is fixed throughout the loan tenure. Fixed interest rates are higher than floating interest rates. Fixed interest rates can be changed into floating interest rates.

Floating Rate Home Loan

Here the interest rate changes according to the market conditions. The floating rate of interest can go down or up depending on the market situations.

The Five-Step easy Home Loan guide for Punekars

Home Loan Guide for First Time Buyers in India
The Easiest Home Loan Guide for First Time Buyers in India

Home Loan Guide – Read this and make a wise decision

As a rule of thumb, Only 60 to 65% of your income after tax must be spent to pay the EMIs. If your EMI cost exceeds 60 or 65 %, then it might be hard to afford the home loan.

Many banks give loans ranging from 15 lakhs to 10 crores.

In the end, Taking a loan having a long tenure might cost more than taking a loan of short tenure.

You will only get a maximum of 75% to 80% of the market value of the house you are planning to buy.

It is not necessary that every part of the house is eligible for the loan amount. So be sure to ask the bank what all comes under the cover.

If you are having a shortage of the loan amount, then up to 3 income-earning members of your family can take the required loan amount.

A fixed interest rate could be affordable to only those who don’t want any increase in the interest rates. Whereas a floating interest rate could be affordable who are immune to change in interest rates.

In terms of fixed interest rates, you could be charged a penalty if you decided to repay the loan amount before the tenure ends. However, in the case of the floating type of interest rate, there is no such penalty.

If you have a home saver account, then you will get discounts on EMIs.

You can’t get a loan if the house comes under the gram panchayat area and if the house doesn’t have an approved building plan.

Don’t you first read the review before going to a restaurant? Similarly, you should also read the reviews of the customers who had taken the home loan from the banks. This will give you important insights regarding whether the bank changes base rates too often.

How does loan processing work in Pune?

Due to digitization, loan processing in India has become easy. Generally, the banks of Pune have the following procedure.

Step 1: Banks will want you to fill the application form along with the required documents.

This is done so as to verify your documents and also to see whether you will be able to pay back the home loan amount.

For your convenience, most of the bank’s representatives will visit your home to collect the documents.

Step 2: Banks will require you to pay a processing fee.

This is the fee that is required to be paid for the maintenance of your home loan account.

Step 3:  Sometimes banks might call you to their branch for face to face discussion. This is done to collect more information about you.

Step 4: Verification of the documents

Bank will verify your documents. It might take 1 to 2 days.

Step 5: If the bank finds that all requirements are met, they will sanction the home loan amount. A sanction letter will be sent to you. The following details will be checked. 

  • Age
  • Qualification details
  • Income
  • Type of Job he or she is pursuing.
  • Experience letter
  • For the Businessman, his or her nature of the business will be analyzed.
  • The transactions that are made with the applicant’s bank.

Step 6: If the home loan amount is approved, an offer letter will be sent stating the loan amount that is approved, the Interest rate on it, type of interest rate, loan tenure, modes of repayment and terms and conditions.

Step 7: An acceptance letter will be signed. This letter has to be signed for the bank’s record.

Step 8: Here all the details regarding the property will be checked by the bank. You must submit all the property-related documents to the bank.

Step 9: After the submission of the property documents, the bank will do a legality check.

The bank’s lawyer will check the documents to make sure that it doesn’t have any illegality in the property.

Step 10: The bank will do a thorough check of the site. They will find out the valuation of the property.

Step 11: After the loan agreement has been signed, the loan will be disbursed.

Home loan guide for documents required to apply for the loan in Pune

Following are the common documents that are required to be submitted to apply for a home loan in Pune.

  • Identity proof like a voting card or a passport or a driving license or a pan card.
  • Residence proof like a ration card or an electricity bill or a passport.
  • You should also have last 6 months bank statements.
  • Processing fee cheque is also required.
  • You have to submit form 16/Income tax returns.
  • A salaried person would be required to submit the last 3 months of salary slips.
  • A self-employed professional would be required to submit proof of business existent, educational qualification certificate, last 3 years income tax returns, last 3 years CA audited financial statements consisting of balance sheet and profit & loss account statement.
  • A self-employed non-professional will be required to submit proof of business existence, Business profile, Last 3 years income tax returns, Last 3 years CA audited Balance sheet and Profit and Loss account. 

What are the charges involved in taking a home loan in Pune?

Typically, the home loan consists of the following charges.

  • Application fee
  • Processing fee
  • Administrative fee
  • Documentation fee
  • Property assessment charges
  • Balanced transfer fee
  • Legal charges
  • Prepayment charges
  • Notary charges
  • CERSAI charges
  • Franking fee (only in some state.)
  • Recovery fee (If the borrower fails to repay the amount.)

Is a co-applicant necessary for a home loan in Pune?

No, a co-applicant is not necessary for a home loan, however having one will make you get the loan easily in Pune. Also, you can get a large amount of HOME loan. There are also tax benefits if a loan is co-applied.

What is sanctioning and disbursement of the loan?

Sanctioning of the loan Disbursement of the loan
Sanctioning of the loan means the approval of the loan amount only if all the requirements set by the lenders are met. It is the guarantee that is given to the customers that loan will be disbursed. Disbursement of the loan means that the loan amount has been put in the customer’s loan account. 
Sanctioning doesn’t have types.Disbursement is of two types
1. Full Disbursement:- In full disbursement of the loan, the entire loan amount is given as a cheque in the name of the builder on behalf of you.

2. Partial Disbursement:-
Partial disbursement means that the loan amount will be given in parts. Partial disbursement occurs for the houses that are under – construction.

How does one make repayments to lenders in Pune?

The home loan amount in Pune can be paid by EMIs via post-dated cheques in favour of the bank or by Electronic Clearing Services System.

What are the home loan repayment options in Pune?

Below are the 5 best home loan repayments options in Pune which will be beneficial for you.

  • EMI Holiday

There are some lenders that will give you an option of paying the EMI not immediately after taking the home loan. Generally, The EMI payment process starts between 36 months to 60 months. However, you have to pay pre-EMI interest.

  • Step-up plan 

There is a Step-up plan, where you will be required to pay less in the initial years but later on, the EMI cost will increase when the tenure end will be coming nearer. Such plans are good for those who are guaranteed that their income will increase in the near future.

  • Step-Down plan

Here the EMI cost will be high in the initial period but later on, it will decrease. 

  • A Ballon plan

 A ballon plan is one type where you can pay 1/3rd of the home loan amount in last instalments.

  • EMIs that can be waived

There is also a scheme, where the EMIs can be waived if you paid the previous EMIs on time and consistently.

Home loan guide to raise funds for the down payment of the loan

A down payment is a part payment that you make for the purchase of your home. The remaining part is financed by the bank. The down payment ranges from 5 % to 30%. The more the contribution of you towards the down payment, the lower the interest rates you will be charged to pay on your home loan in Pune.

Here is a home loan guide for raising funds in Pune to pay for the down payment of your home loan.

By taking a personal loan

A Personal loan can be used to make down payments. However, not all mortgage banks in Pune will allow doing this. Personal loans have high-interest rates as compared to home loans. Also taking a personal loan for paying down payment will affect your credit score badly.

You can get a tax benefit in Pune if you are taking a personal loan to clear the down payments on the home. However, this will be only beneficial if you are sure that in future you are going to get a lot of money.

Guide on tax benefits for a first time home buyer by taking a personal loan

Here are the tax benefits that a first time home buyer can get in Pune.

  • Section 24 of the Income Tax Act, 1961

Here the tax is deducted on the basis of the interest. The maximum deduction of  2 lakh amount can be claimed yearly.

  • Section 80C of the Income Tax Act, 1961

 Here the tax is deducted on the basis of the principal amount. The maximum deduction of 1.5 lakh amount can be claimed yearly

  • Section 80EE of the Income Tax Act, 1961

Besides the above-mentioned deductions, you can also enjoy additional interest deduction benefits. The maximum deduction of 50 thousand can be claimed yearly.

Pradhan Mantri Awas Yojana -PMAY

Pradhan Mantri Awas Yojana scheme was launched by the Prime Minister Narendra Modi in the year 2015 to provide affordable housing to the citizens. According to it, one will be able to get up to 6.5% of subsidy on the home loans. This amount can be used to pay down payments. 

Home loan guide eligibility for Pradhan Mantri Awas Yojana

Here are the common home loan eligibility criteria for Lower Income Group/Economically Weaker Section (LIG/EWS) and Middle Income Group (MIG – I & II)

  1. The applicant must not have any pucca house in any part of the country in either his/her name or any of his/her family member.
  2. The applicant must not have taken any benefit related to housing scheme from neither the state nor the central government before.
  3. It is compulsory that at least one female should be the co-owner of the property
  4. The location should be according to the 2011 census town classifications.

Here are the uncommon home loan eligibility criteria.

Lower Income Group/Economically Weaker Section (LIG/EWS)

Household Income: Up to 6 lakhs
Tenure for calculating subsidiary amount: 20 years
Documents required: Aadhar card

 Middle Income Group (MIG – I & II)

MIG-I 

Household Income: 6 to 12 lakhs
Dwelling Unit Carpet Area: Up to 160 Sq Mt
Tenure for calculating subsidiary amount: 20 years
Documents required: Aadhar card

MIG-II

Household Income: 12 to 18 lakhs
Dwelling Unit Carpet Area: Up to 200 Sq Mt
enure for calculating subsidiary amount: 20 years
Documents required: Aadhar card

What are the home loan insurance options in Pune?

A home loan insurance for house in Pune will safeguard your family members in case something bad happens to you. Here, the insurer will pay the outstanding home loan amount on behalf of you.

There are two types of home loan insurance options in Pune. The first option is term insurance, where the insurer will pay for all your debts and liabilities. Whereas the second option is Separate home loan insurance in which only your outstanding home loan amount will be paid.

Here are the three home loan insurance coverage options in Pune.

Level Cover Plan

Here the coverage doesn’t change throughout the tenure.

Hybrid Cover Plan

Here the coverage is depended on the balance amount. The coverage reduces as the balance amount reduces.

Reducing Cover Plan

Here the coverage, as well as the outstanding home loan amount, decreases when the tenure is nearing to its end.

Other terminologies you should know while availing home loan in Pune

Foreclosure Charges

Foreclosure charges are the charges which are charged when the home loan amount has been paid fully instead of paying EMIs before the loan tenure.

Home Loan Transfer Charges / Conditions

These are the charges which are levied when you transfer the balance of your existing home loan to another bank. Generally, this is done in the case where the new bank offers a low-interest rate on the same home loan amount.

Prepayment of Home Loan

It means that you can pay the home loan amount in advance before the loan tenure ends. You can do it in Part or in Full. Prepayment facility is very beneficial to those who have surplus funds.

Repayment Capacity

Repayment Capacity is the capacity of the concerned person to repay the loan amount in time. The repayment capacity measures provide insight into whether you will be able to pay the loan amount or not in time.

Value of Property

Every bank will send a team of experts on the property site to know the value of the property.  This is done to prohibit the applicants’ form showing the wrong property rate just to get the cheap home loan.

Home loan guide for MCLR and Base rate 

MCLR and Base rate are the lending rates below which the banks can’t lend money. However, there are few cases where RBI has allowed to provide the home loan below the minimum lending rates. 

MCLR (Marginal Cost of Funds based Lending Rate)Base Rate 
MCLR calculation is based on the marginal cost of funds, tenor premium, operating cost and cash reserve ratio maintenance cost.Base rate is calculated based on profit,  bank costs, bank deposit rates, cost of funds, operating costs and cash reserve ratio maintenance cost.
Reserve bank of India’s repo rate plays a key role in determining MCLR.Base rate is not depended on MCLR.

How LoansXpert can guide first-time Homebuyers? 

At LoansXpert we have a pool of expert advisors and consultants having almost a decade of experience in financial and home loan consulting. 

We treat every case of ours with the same energy and enthusiast and study each and every minute aspect of your case’s for better advice on your home loan with the best interest rate possible from the market. We provide end to end consultation and advice for your home loan in Pune

Summary of home loan guide for a first-time home buyer in Pune

  • Keep your banking clear and proper.
  • Check your credit history before applying for the home loan.
  • Finalize your budget and a preferred area where you are planning to buy a flat.
  • Check your income and expenses to figure out the affordability.
  • Check your eligibility using the Home Loan eligibility calculator App.
  • Compare Home Loans rate of interest of different banks.
  • Compare the other charges and conditions associated with the home loan of different banks.

Home Loan Guide Conclusion

Make informed decisions, research carefully regarding what are the home loan schemes that are offered by the lenders in Pune. Know the home loan process in Pune perfectly before applying for the one. Check your repayment capabilities and credit score before applying for the home loan. Check out our tricks on maintaining a good credit score.

Keep all the documents ready before starting the process of the home loan application. Compare each lender properly. If you don’t want to go in the hassle of comparing the lenders, then remember that LoansXpert is always there for you to compare lenders and suggest you the most suitable lender that will offer you home loan having a low-interest rate.

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